China Unicom, the country’s second largest mobile operator, reported a 4.5 per cent increase in H1 net profit to CNY6.99 billion (US$1.09 billion) despite losing ten million mobile customers.

With pressure on data pricing, both from the competition and the government, steps to reorganise its sales and marketing structure helped cut operating expenses by 3.5 per cent.

The operator’s revenue declined 3.3 per cent to CNY144.69 billion during the period, with service revenue falling 5.3 per cent to CNY120.27 billion, which the company attributed to the impact of the country’s VAT reform last year.

While its mobile revenue fell sharply (9.7 per cent) to CNY73.46 billion, fixed revenue rose 2.2 per cent to CNY46.19 billion.

Its two rivals both posted declines in net profit for H1. China Mobile’s net profit fell 0.8 per cent but operating revenue expanded 4.9 per cent. China Telecom saw its net profit drop 4 per cent and operating revenue decline 0.6 per cent.

Mobile broadband turnover accounted for 71.8 per cent of mobile revenue, up by 4.9 percentage points year-on-year. Mobile data usage expanded 54 per cent from a year ago. Mobile ARPU rose 2.7 per cent year-on-year to CNY42.10.

Unlike its rivals, China Unicom didn’t break out 4G connections growth over the first half of the year. Instead it combines 3G/4G technology into a ‘mobile broadband’ category, of which it claims 157.79 million connections (an increase of 8.68 million and 54.5 per cent of its total mobile customer base). China Mobile said its 4G base is now 190 million, while China Telecom has hit 29 million 4G connections.

Customer base falls
Worringly, China Unicom’s total mobile base has fallen to 289.3 million from 299.1 million in the past six months – a loss of ten million.

It added 272,000 4G base stations in H1, taking its total number of mobile broadband base stations to 837,000. Its target for 2015 is 1.2 million.

Total operating expenses fell 3.5 per cent year-on-year to CNY135.7 billion, with sales and marketing expenses dropping 38.6 per cent to CNY14.63 billion as a result of the company taking steps to transform its sales model. Terminal subsidy costs as a percentage of service revenue of the mobile broadband business fell to 2.3 per cent from 6.1 per cent in H1 2014.

Its EBITDA rose 5.8 per cent to CNY50.46 billion compared to a year ago.

Looking ahead to the full year, China Unicom chairman and CEO Chang Xiaobing said the company will accelerate the construction of high-quality mobile and fixed-line broadband networks to support its business transformation and future development as well as the national “Internet+” strategy.

By the end of the year it also plans to double the maximum downlink speed of its LTE network to 300Mb/s, and will trial VoLTE and dual carrier aggregation services. Next year it will take speeds to 330Mb/s and commercially launch VoLTE and dual carrier aggregation, while trialling triple carrier aggregation.

Like rival China Telecom, which reported disappointing H1 earnings, China Unicom won’t pay an interim dividend for the period ending 30 June. China Mobile, however, said it will pay an interim dividend of HKD1.525 (US$0.2) per share.